Beware of Strategic Default on Freddie or Fannie
Homeowners who have their mortgages with Freddie Mac or Fannie Mae need to be aware of the consequences of walking away from mortgages when they have the financial ability to pay or a "strategic default".While owning a home that is under water is an unenviable position, walking away from that responsibility can have devastating consequences.
A report from the Federal Housing Finance Agency criticizes these two government sponsored enterprises for doing a poor job of handling deficiency judgments against delinquent homeowners. The intent is to force these GSEs to more aggressively pursue strategic defaulters to cut down on the financial losses and to deter future actions.
There is big money at stake according to the Office for the Inspector General. A recent report stated that Freddie Mac failed to refer 58,000 foreclosures with an estimated 4.6 billion in possible collections. Of course, not all of the money was recoverable. Many homeowners have simply run out of resources, but the report stated that by not taking any action Freddie eliminated any possibility of collecting what is owed.
Fannie Mae holds a much larger portfolio of troubled assets. At the close of 2012, the agency owned over 105,000 foreclosure homes and had 576,000 properties characterized as "seriously delinquent" meaning over 90 days or more late.Short filing time lines seem to be a major factor in many cases. Several states allow only between 30 and 180 days to pursue a homeowner for collection.
The report from OIG was very clear on one point.The practice of not following up and pursuing those who use the strategic default only encourages other borrowers to walk away from mortgages that they can afford to pay.
Tucker Real Estate Experts